Silver has been a top performer in 2024, at one point beating gold’s advance with a 50% rally.
The consensus appears to be that 2025 will be even better for the metal that is now more than just a store of wealth, but also in rising demand for its usefulness in clean energy applications.
Peak Asset Management executive director Niv Dagan tells Mining.com.au the gold-silver ratio is coming closer together.
“Silver has actually outperformed gold,” Dagan notes.
The gold-to-silver ratio denotes how many silver ounces are needed to buy one ounce of gold. It shows how many multiples that gold is trading relative to silver. The typical range of gold to silver is between 50 and 70.
It is currently up over 88 and has been as high as 91.79 in 2024.
Gavin Wendt, resource analyst and founder of MineLife, tells Mining.com.au that on a historical basis, when the ratio has topped 80, it has nominally indicated a time when silver was inexpensive relative to gold — in effect a “silver buying opportunity”.
“The result was that silver went on to rally 40%, 300%, and 400% the last three times this has occurred,” he explains.
“Conversely, the three times the ratio has fallen below 20 in the past, it has marked a period when gold was relatively inexpensive compared to silver. History therefore suggests that the current conditions represent a buying opportunity in silver.”
Canaccord Genuity Australia equity research analyst Tom Prendiville says while the gold-to-silver ratio is not at an all-time high, it is well above its long-term historical average, which is closer to 60-to-one.
In October, the price of silver rose above US$34 ($55) an ounce, which Prendiville says represents a 10-year high.
“That’s a significant rise in absolute terms for silver. It also represents a small outperformance relative to gold this year . . . and obviously, it’s a significant outperformance versus other commodities,” Prendiville tells this news service.
“If you look at base metals, EV materials such as lithium, the performance of those commodities this year has been obviously a lot lower than what silver has done.”
While news of Donald Trump’s US election victory in early November saw both gold and silver come off the boil, things appear to have returned to an even keel.
Silver bottomed at US$30.12 an ounce by the end of November and has recovered some of its losses to fetch around US$30 an ounce.
Market commentators see positive momentum for the metal continuing into the new year, driven by record US debt levels, global geopolitical uncertainty, and monetary policy easing across global markets.
Industrial demand powers silver’s rise
At the same time, the silver market has been in a deficit for the past three years and the supply-demand gap is only set to widen.
“We expect these material deficits to remain over at least for the foreseeable future,” Prendiville says.
“Silver is a little bit different to gold in the sense that it has dual application. On the one hand it’s usually a store of value, so it’s a higher beta version of gold, but it’s also expected to be influenced by similar themes to gold in 2025.
“Then on the other side, it’s also used as an industrial metal. It’s got various properties, such as it’s highly conductive and it’s got antibacterial properties. Because of that it’s used in various industries such as solar, healthcare, biotech, nanotech.
“All of these types of sectors are expected to drive the demand for silver into the future.”
On the supply side, disruptions to operations in key producing countries like Peru have seen the flow of primary silver fall.
Mike Jones, Managing Director of Impact Minerals (ASX:IPT), says there is a genuine supply shortage.
“I think the underlying fundamentals for silver from an industrial use point of view are pretty good,” he tells Mining.com.au.
While Impact is largely high-purity alumina-focused, the company’s portfolio hosts silver projects as well.
In mid-August, the explorer entered into a binding agreement to sell up to a 75% interest in its Commonwealth Gold-Silver Project to Burrendong Minerals (proposed ASX code ‘BIG’), which is preparing to list on the ASX in early 2025.
Burrendong will control three JORC-compliant resources containing 120,000 ounces of gold, 3.3 million ounces of silver, and 30,250 tonnes of copper.
The resources are located within the Commonwealth Mine and Silica Hill, part of the Commonwealth Project, and Galwadgere, located 10km along-trend to the south of Commonwealth.
Following Burrendong’s listing on the ASX, Impact will initially have a 12.5% stake in Burrendong and a 49% interest in Commonwealth.
Pure-play silver mines highly sought after
Canaccord’s Prendiville says the supply shortage is pushing up the value of high-quality primary silver mines and igniting more mergers and acquisitions in the space, deals like Coeur Mining’s (NYSE:CDE) US$1.7 billion buyout of SilverCrest Metals (NYSE:SILV).
“Looking at the multiples being paid on some of these transactions, they’re up at around one and a half to two times net asset value in some cases,” he explains.
“Clearly, very large premiums being paid here for these high-quality and increasingly scarce silver assets.
“So, if you put that together you’ve got high demand, you’ve got sluggish supply, that’s going to probably see the supply deficits for silver persisting into the future and supporting the price.”
MineLife’s Wendt says the biggest factor that can incentivise new silver production is a period of sustained higher prices.
“Typically, much of the world’s silver production has come from large, low-cost mines, or multi-commodity operations that produce silver as a by-product,” he explains.
“This is due to a background of price volatility in the silver space, which means only these companies can weather the storm.
“For those hopefuls wanting to develop a standalone silver mine, oftentimes their planned operation cannot withstand price volatility throughout the cycle — meaning there are periods when cost of production would well exceed the sale price received.
“This is why there is a dearth of standalone silver mines in Australia. Any planned silver development needs to be at the lower end of the cost curve.”
The positive supply-demand fundamentals are prompting investors to look more closely at the silver players.
“I think this year you have seen an improvement in investor sentiment towards silver,” Canaccord’s Prendiville says.
“I think this year you have seen an improvement in investor sentiment towards silver.
“Then, on the back of that, we have seen a lot more interest from equity investors, both locally and overseas for silver stocks. On the back of that, we have seen a lot of them rerate.”
Cannacord has been quite active in the silver space in terms of equity capital markets transactions this year.
“We’ve definitely seen activity pick up in the silver space from a capital raising point of view,” Prendiville says.
BDO Australia named Andean Silver (ASX:ASL) one of the top 10 largest capital raisings during the September quarter of 2024.
The company raised $25.39 million in cash via a placement and $720,000 from the exercise of options.
However, Wendt says there is a real disconnect between the value of quality explorers and companies with shovel-ready projects, and those who are actually mining and producing.
“There is a real lack of risk appetite in the precious metals space at the present time, despite the fact that is far and away the best-performing sector in terms of underlying commodity prices,” he notes.
Iltani Resources (ASX:ILT) recently reported a “bonanza grade” 2,066 grams per tonne (g/t) silver equivalent hit at its Orient East deposit, part of the Orient Silver-Indium Project in Herberton, North Queensland.
The junior explorer completed reverse circulation drilling, which focused on an area targeting multiple intersecting higher-grade vein systems with associated low-grade stockwork mineralisation, many at shallow depths.
Hole ORR055 delivered Orient’s highest grades yet, with a peak result of 1m @ 2066.3 g/t silver equivalent from within a wider intercept of 4m @ 921.8g/t from 77m.
In May 2024, Iltani’s share price notched a 52-week high of $0.40. The company has a market capitalisation of around $8.3 million.
Meanwhile, Wendt sees potential in Unico Silver (ASX:USL), which is advancing its flagship Cerro Leon Project.
Cerro Leon was born from three separate transactions from November 2022 to May 2024 and includes the more advanced Pinguino Project, Sierra Blanca, and the greenfield Conserrat Project.
The project is located within the same structural corridor that is host to AngloGold Ashanti’s (NYSE:AU) Cerro Vanguardia mine.
Cerro Leon hosts an indicated and inferred resource of 16.47 million tonnes @ 172g/t for 91.3 million silver-equivalent ounces.
“During July 2024, Unico acquired the Sierra Blanca Silver-Gold Project, which allowed it to expand Cerro Leon and consolidate the Pinguino vein into a single entity,” Wendt explains.
“Unico subsequently acquired the Joaquin and Cerro Puntundo projects during October 2024.
“The projects are located 60km from the Cerro Leon Project, enhancing the overall scale and economics of the regional portfolio.”
Joaquin contains a historical foreign resource estimate of 16.7 million tonnes @ 136g/t for 73.4 million silver-equivalent ounces.
Triple digit silver coming
Unico Silver Managing Director Todd Williams told Mining.com.au in early December that since 2011, silver had performed well within narrow windows because monetary policy and fiscal stimulus has been suboptimal or asynchronous.
“Essentially, the catalyst for significantly higher silver must be a global recession, followed by lower rates and coordinated stimulation of the global economy,” Williams says.
“This is the backdrop that sent silver rocketing to US$50 per ounce in 2011. I share the view of many commentators that triple digit silver is something that should happen in this coming cycle.”
Unico has a market capitalisation of $87.6 million and has traded as high as $0.36 in 2024.
Another junior explorer Wendt likes is Sun Silver (ASX:SS1), which has only been listed since May 2024, following the acquisition of its Maverick Springs Silver-Gold Project in Nevada, US.
“The company has been busily engaged in a review of historical drill data, together with a re-modelling of the existing resource,” Wendt says.
“Sun Silver’s work resulted in a recent 45% increase in the inferred mineral resource to 423 million ounces of silver-equivalent — comprising 253.3 million ounces of silver and 2 million ounces of gold from 195.74 million tonnes of ore, with average grades of 40.25g/t silver and 0.32g/t gold.
“Encouragingly, the upgrade did not include data from the company’s ongoing inaugural drill program, which had encountered high-grade silver in the northwest section of Maverick Springs, an area outside of the existing resource where historic drilling identified grades up to 6,216g/t silver.”
Sun Silver has a market capitalisation of $110.8 million and traded as high as $1.18 in 2024.
Both Wendt and Canaccord’s Prendiville see plenty of potential in Andean Silver, which has a market capitalisation of $159.9 million.
The explorer owns the Cerro Bayo Silver-Gold Project in Southern Chile.
Wendt says the project hosts a former producing mine that was in operation for more than 15 years, producing 45 million ounces of silver and 650,000 ounces of gold during this period, before being placed on care and maintenance during 2022.
“Andean’s current focus is on upgrading the existing resource base, where it recently reported an 80% upgrade in silver-equivalent ounces to 91 million at a grade of 342g/t silver equivalent,” Wendt notes.
The global resource comprises indicated and inferred resources hosting 39 million ounces of silver and 628,000 ounces of gold from within 8.2 million tonnes of ore @ average grades of 146g/t silver and 2.4g/t gold.
Canaccord’s Prendiville says Andean Silver is a “high-quality name in the junior space”.
“The reason why I like this one is they’ve currently got a resource of 91 million ounces of silver equivalent. They’ve got two drill rigs on site, adding a third one this month and potentially a fourth one early next year,” he says.
“So the rig is really drilling out this resource, looking to grow it materially over the next 12 months and with the drill results to come from all this drilling, they’re looking to put out a resource update in the March quarter of 2025, and then another resource update in September 2025.
“So lots of news flow to come here. There’s a major sunk capex, so they’ve got about $150 million in infrastructure sitting there because this was a mine that had been operated under different ownership previously.”
Write to Angela East at Mining.com.au
Images: Stock & AngloGold Ashanti
